Eros International on a robust growth path

Anusha Subramanian        Last Updated: February 8, 2012  | 17:15 IST

Anusha Subramanian
Anusha Subramanian
Eros International, the same company that made this month's top five hit film "Zindagi Na Milegi Dobara", recently announced its first quarter results. Despite the June quarter being soft for the film industry with a heavy cricketing calendar, Eros International Media reported a strong operating performance for Q1FY2012 with revenue up 21.8 per cent to Rs 153.8 crore, which was ahead of media analysts' expectation of Rs 130.3 crore.
The revenue was boosted by the robust box-office collection of "Ready", the biggest hit of 2011, which earned close to Rs 179 crore at the box office, according to certain media reports, as well as higher booking of satellite rights.
Overall, the company released 19 films in the quarter including seven Hindi films and twelve Tamil films. The EBITDA margin remained stable at 19.4 per cent, up 30 basis points year on year (YoY). The margin performance was stable despite the late stage acquisition of global distribution rights of "Ready".  The resultant EBITDA grew by 23.7 per cent to Rs 29.9 crore.

Ra One is among the forthcoming releases from Eros
Ra One is among the forthcoming releases from Eros
According to Sunil Lulla, Vice-Chairman and Managing Director, Eros International Media, "A strong film slate, unparalleled distribution network, a remarkable film catalogue backed by our de-risking of revenues approach has been the backbone of growing profits for the Company".

"We have created a robust operating platform complete with sustainable competitive strengths, further placing us in a lead position within the sector both in India and globally," he adds.

Apart from the theatrical success of "Ready", the company's revenues during the quarter were also driven by the success of movies like "Chalo Dilli" and Tamil films such as "Avan Ivan", "Engeyum Kadhal and Ko", strong contribution from catalogue portfolio, stable revenues from VFX facility, and new media.
After 33 years of presence in Indian cinema, the company has come a long way from being a mere film distributor to being a content aggregator. It has built a successful business model by co-producing, acquiring and distributing Hindi and other Indian language films across multiple channels such as theatre, television and digital new media platforms. Eros International currently has a library comprising 1,100-plus films, which provides a reliable source of recurring cash flow and enables the company to adopt a "bundling" licensing strategy which is a key competitive advantage. Even if the company does not produce any films, it can still earn revenues by monetizing its library.
"Currently, 15 per cent of the total revenues comes purely from our library monetization," says Kamal Jain, CFO, Eros International Media. Jain expects that this percentage will only grow going forward given that there are going to be lot more platforms to deliver the content. Eros has also started making its content 3G-compatible. Eros is aiming to be to Bollywood what Fox, Warner Bros or Walt Disney is to Hollywood.
According to a ShareKhan report on Eros International Media, the company has seen a strong performance in July and August 2011 with a strong box office collection from "Murder 2" and even bigger collection from "Zindagi Na Milegi Dobara" (ZNMD), which set the ball rolling for the strongest period for the industry. ZNMD, which was released worldwide on July 15, 2011, has had worldwide gross box-office collection of about Rs145 crore (India box-office collection about Rs110-115 crore and international box-office collection of Rs 30-35 crore). Till fiscal 2013 Eros International has lined up more than 50 films in Hindi, Tamil and a few other languages, including films such as "Ra One",  "Rockstar", "Desi Boyz" and "Mausam".
Analysts expect that the upcoming festival season would see the company cash in on its big releases, the main being "Ra One" as well as on the higher booking of television satellite rights.  According to a recently released PwC report on the Indian entertainment sector, the film sector is projected to grow at a CAGR of 9.3 per cent over the next five years, reaching Rs 13,650 crore in 2015, from Rs 8750 crore in 2010.  Given this backdrop and with the company having already signed up for almost 60 per cent of the film slate in FY2013, all seems good for Eros International Media.

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